Arla Foods Announces Sustainable Farming Incentive Scheme of 500 mEUR

Published on: 07 October 2022
by KnowESG
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Arla Foods offers a sustainability incentive to its farmer owners to help fund and inspire actions required to meet the 2030 emission reduction target on farms.

In addition to the existing 1 eurocent for submitting Climate Check data, Arla has set aside up to 3 eurocents per kg of milk for sustainability efforts. Based on the cooperative's current milk volume, this corresponds to a total of up to 500 mEUR annually.

Arla farmers are taking another big step to remain at the forefront of environmentally sustainable dairy two years after adopting a comprehensive Climate Check on 8,000 farms across seven European countries. Beginning next year, the milk price received by the individual Arla farmer from the dairy cooperative will be determined by his or her environmental sustainability activities.

The cooperative is adopting a point-based Sustainability Incentive model based on Climate Check data to reward existing and future farm sustainability activities. The Board of Directors has set aside up to three eurocents per kg of milk every year to support and motivate environmental improvements across 19 levers. 

The whole incentive package includes a one-eurocent payment to farmers for submitting Climate Check data. Based on what farmers do on the model's 19 levers, at least 270 million EUR is estimated to be distributed through the monthly milk price in the first full year.

Arla’s Chairman Jan Toft Nørgaard, said: 

"The Sustainability Incentive model is a historical milestone in Arla’s transition to more sustainable dairy. We are introducing an advanced and ambitious sustainability incentive, which is a fundamental change to our milk price model. 

"Going forward, the milk price Arla farmers will receive for their milk will not only depend on fat, protein and quality, it will also depend on their activities on sustainability. The support from our members, even in a time of great uncertainty, is a testament to our commitment to being at the forefront of progressive dairy farming and setting the standard for how to push our whole sector forward."

The three eurocents are in addition to the one eurocent farmers earn for submitting their Climate Check data, which is a prerequisite for calculating the individual farmer's incentive. 

Based on Arla's current owner milk volume, the four eurocents per kilo of milk equates to an annual 500 million EUR that Arla's Board of Directors is willing to take from Arla's milk price and re-distribute to farmers based on their points in the Sustainability Incentive model. It corresponds to around 7% of the current milk price. 

Source: Arla Foods

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